SAT sets aside Sebi AO order in NSE colo matter, sees nothing new in it

Tribunal was comparing latest order with previous one for which it issued directions in Jan; quashes fine imposed by Sebi officer, says same violation cannot suffer two penalties

The Securities Appellate Tribunal (SAT) has set aside an order by the market regulator Securities and Exchange Board of India’s (Sebi’s) adjudicating officer (AO) in the National Stock Exchange (NSE) colocation (colo) matter.

In separate orders dated February 2021, Sebi had imposed a penalty of Rs one crore on NSE and Rs 25 lakh each on former Managing Director and Chief Executive officers (MD & CEOs) Ravi Narain and Chitra Ramkrishna.  This penalty was in addition to that of Rs 625-crore disgorgement order passed by Sebi’s whole-time member (WTM) in April 2019, on which the tribunal had passed a judgement earlier this year.

In the arguments, Sebi's counsel had pointed out that as the WTM and the AO had started different proceedings under two different chapters of Sebi Act, the imposition of penalties were appropriate.

The tribunal said the findings given by the AO were virtually the same as given by the WTM, against which SAT has already passed the judgement in January.

While quashing the penalty imposed by the Sebi officer, the bench headed by Justice Tarun Agarwala noted that two penalties for the same violation cannot be imposed.

It said that the penalty of Rs 100 crore imposed on NSE in the earlier order in the colocation matter in January was sufficient.

“The findings given by the AO in the impugned orders is virtually the same as given by the WTM in its orders and that the decision of this tribunal squarely covers the issue,” SAT said in an order.

On appeals by Ramkrishna and Narain, SAT said, “We find that no further directions are required to be issued and the imposition of penalty in the circumstances is unwarranted.”

However, while affirming the violation by OPG Securities—a broking firm accused in the colocation matter—the tribunal has directed Sebi to reconsider the quantum of penalty.

In its order in January, SAT had set aside the Rs 625-crore disgorgement order and instead had directed the NSE to deposit Rs 100 crore for the lack of due diligence in following its own norms and circulars in the colocation matter.

The tribunal had noted that NSE had not unjustly enriched itself. In the order, the tribunal had also observed that there had been no finding that Ramkrishna or Narain had made profits or wrongful gains. Their debarment from associating with any listed company or market infrastructure institution for five years was also substituted by the period undergone.

SAT had also set aside Sebi’s direction to disgorge 25 per cent of the salary from Narain and Ramkrishna.